IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2016-425-000121 [2018] NZHC 2760

BETWEEN	SPEARGRASS HOLDINGS LIMITED
Appellant	

AND	
QUEENSTOWN LAKES DISTRICT COUNCIL
Respondent	

AND	
FLAX TRUST Interested Party	

CIV-2017-425-000062

BETWEEN	SPEARGRASS HOLDINGS LIMITED First Applicant

AND	CHRISTOPHER SCOTT MEEHAN AND MICHAELA WARD MEEHAN
Second Applicants

intituling continued

Hearing:	On the papers	

Appearances:	
A J L Beatson and R A Rose for Speargrass Holdings Limited and
C S and M W Meehan
P J Page and S R Wells for Flax Trust and F P M and
D M J van Brandenburg
N M Whittington and A H Balme for Queenstown Lakes District
Council	

Judgment:	
24 October 2018	

JUDGMENT OF DUNNINGHAM J RE:  COSTS DECISION

SPEARGRASS HOLDINGS LIMITED v QUEENSTOWN LAKES DISTRICT COUNCIL [2018] NZHC 2760 [24 October 2018]

AND	FREDERIKUS PETRUS MARIA VAN BRANDENBURG AND DIANNE MARY JACQUELINE VAN BRANDENBURG Respondents

CIV-2017-425-000078

BETWEEN	SPEARGRASS HOLDINGS LIMITED Applicant

AND	CHRISTOPHER SCOTT MEEHAN AND MICHAELA WARD MEEHAN
Second Applicants

AND	QUEENSTOWN LAKES DISTRICT COUNCIL
First Respondent

AND	FREDERIKUS PETRUS MARIA VAN BRANDENBURG AND DIANNE MARY JACQUELINE VAN BRANDENBURG Second Respondents

Introduction

[1]       On 9 May 2018, I delivered a judgment on three causes of action brought by Speargrass Holdings Limited (Speargrass).1  They all related to a 5.1 metre high earth mound constructed on the boundary of land owned by Mr and Mrs van Brandenburg, the trustees of Flax Trust.  The mound was intended to obscure views of the house built on adjoining land owned by Speargrass and occupied by Mr and Mrs Meehan.

[2]       As I explained in the judgment, Speargrass challenged the earth mound on three fronts. Those were:

(a)	an appeal of the decision of the Environment Court granting a variation of the resource consent that authorised the construction of the mound,

1	Speargrass Holdings Ltd v Queenstown Lakes District Council [2018] NZHC 1009.

to allow its height to be increased from 2.7 to 5.1 metres above existing ground level (the Environment Court appeal);

(b)       an application for judicial review of the decision of the Queenstown Lakes District Council (the Council) not to notify the original application for resource consent permitting construction of the earth mound, as well as of the Council’s decision to grant that consent (the judicial review proceedings); and

(c)       an application for an order under s 333 of the Property Law Act (PLA) requiring the removal of the earth mound at the cost of Flax Trust or its trustees, Mr and Mrs van Brandenburg (the PLA proceedings).

[3]       In my judgment, I allowed the Environment Court appeal. The practical effect of this was that Flax Trust only had a resource consent to construct the mound to
2.7 metres, not the 5.1 metres as actually constructed.

[4]       In respect of the judicial review proceedings the Council accepted, and I agreed, that it had erred in its interpretation of the permitted baseline under its plan in its notification and substantive decisions on the original earthworks consent. However, given the delay in bringing the application, and the consequent prejudice to other parties, I declined to grant relief.

[5]       In the PLA proceedings I agreed that the earth mound was a “structure” under the PLA and, as built, it did have undue effects on the reasonable use or enjoyment of the Speargrass property for residential purposes.  However, given the outcome in the Environment Court appeal proceedings, I considered that an order under the PLA was not necessary to remove that undue interference, or prevent its recurrence.

[6]       Because the parties had experienced mixed success on the three causes of action, I expressed the tentative view that costs should lie where they fall. Nevertheless, I reserved leave to file submissions on costs.

[7]       Flax Trust has availed itself of that opportunity and now seeks an order for costs in its favour. The trustees’ position is that Speargrass initiated three proceedings but succeeded only in one.  In those circumstances, costs should follow the event on the failed judicial review and PLA proceedings as Speargrass has achieved nothing more than had they prosecuted the Environment Court appeal only, meaning a net award of costs to Flax Trust. Furthermore, Flax Trust seeks an uplift of 30 per cent on
2B  scale  costs  in  the  judicial  review  proceedings  and  on  some  steps  in  the PLA proceedings, because Flax Trust alleges that the conduct of Speargrass meant it incurred far more cost than was necessary.

[8]       Speargrass’s position is that costs ought to lie where they fall, particularly when none of the proceedings would have been necessary had the van Brandenburgs “shown greater respect for the law and their neighbours and not illegally constructed the
as-built earth wall in the first instance”.

The issues

[9]       At issue in the circumstances are whether:

(a)	costs should be awarded on the basis that Speargrass was successful in one claim and unsuccessful in two claims; and

(b)	the claim for increased costs against Speargrass is warranted having regard to:

(i)	the  delay  caused  by  filing  two  further  (and  ultimately unnecessary) proceedings;

(ii)      the sheer volume of material put before the Court by Speargrass; (iii)     the unmeritorious nature of the judicial review proceedings; and (iv)      the rejection of a settlement offer on 9 February 2018.

Principles applying to costs award

[10]     The principles applying to the determination of costs are well established. The Court’s discretion to award costs must be exercised having regard to the general principles set out in Part 14 of the High Court Rules 2016.  These principles include that:

(a)	the party who fails should pay costs to the party who succeeds;2

(b)       costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required;3 and

(c)       so far as possible, the determination of costs should be predictable and expeditious.4

At issue here is how the first of these principles should be applied in the unusual circumstances of these proceedings.

[11]     Flax Trust also seeks increased costs. The principles governing when a Court may order a party to pay increased costs include where the party opposing costs has contributed unnecessarily to the time and expense of the proceedings or any step in it by:

(a)       failing,   without   reasonable   justification,   to  accept  an  offer   of settlement;5 or

(b)	taking or pursuing an argument that lacks merit.6

[12]     I consider the issues raised by the parties’ costs memoranda [in light of these general principles].

2	Rule 14.2(1)(a).
3	Rule 14.2(1)(c).
4	Rule 14.2(1)(g).
5	Rule 14.6(3)(b)(v).
6	Rule 14.6(3)(b)(ii).

Flax Trust’s submissions

[13]     Flax Trust submits that the appropriate course for Speargrass to challenge the mound was the Environment Court appeal.  That had been scheduled for hearing on
10  October  2017,  but  did  not  proceed  because  Speargrass  filed  the  additional two proceedings  on  3 August  2017  and  prevailed  upon  the  Court  to  have  all three proceedings heard together.  In Flax Trust’s submission, the commencement of the two additional proceedings were “devices used to apply pressure on Flax by causing delay to the advancement of Flax’s subdivision and to maximise costs incurred”.

[14]     Flax Trust is also critical of the “extraordinary” amount of material Speargrass put before the Court which “reached its zenith with the 101 pages of legal submissions filed in the judicial review proceeding”.  This inevitably led to increased costs in the proceeding.

[15]     Flax Trust also relies on the Court’s observation that the judicial review proceedings appear to have been filed as something of an afterthought “to maximise pressure on Flax Trust”.7  Flax Trust goes on to say that the judicial review proceedings should be characterised as a “hopeless case that was doomed to fail”. This is because it had been commenced “hopelessly late” and had been overtaken by the appeal before the Environment Court.

[16]     Furthermore, the evidence Speargrass sought to rely on was inconsistent with the evidence it and its experts gave in the Environment Court.  In addition, much of it was in the nature of opinion evidence that went to the merits of the Council’s decision rather than identifying reviewable errors.  In Flax Trust’s submission, the Council’s concession that it made a material error of law in relation to the way it applied the permitted baseline to earthworks, did not detract from the difficulty Speargrass would face in obtaining relief when it had told the Environment Court that the mound, at the height originally approved, was acceptable.

7	Speargrass Holdings Ltd v Queenstown Lakes District Council, above n 1, at [207].

[17]     Flax Trust also relies on the fact it made an open settlement offer to Speargrass on 9 February 2018.   The gist of the offer was that Flax Trust would remove the additional height of the mound, but only when the trees on Speargrass’s property had attained the height of five metres from the base of the mound. Flax Trust submits that had Speargrass accepted this offer, the two sides would have avoided significant additional cost and finality would have been achieved between the parties which is still not the case.

[18]     The calculation of costs proposed is that the case management steps involved in all three proceedings are split three ways, with Flax Trust being awarded two-thirds and Speargrass one-third.  Flax Trust then seeks a 30 per cent uplift on the one-third share related to the judicial review proceedings.

[19]     In practical terms, the net amount Flax Trust would receive from Speargrass would be $35,462.36 if the uplift is applied.   If, however, 2B costs are applied throughout, and set off against costs that Speargrass would be awarded for the appeal, the net amount would be $25,483.65. It should be noted that this also includes the full cost of Flax Trust’s disbursements.

Speargrass’s submissions

[20]     Speargrass submits that costs ought to lie where they fall in each proceeding. If there is to be any departure from that position, it submits that the most appropriate (i.e. fair, just and reasonable) costs orders are that 2B costs plus disbursements (including expert witness costs) are awarded to Speargrass on each of the appeal and PLA proceedings, and 2B costs plus disbursements (including expert witness costs) in Speargrass’s favour on the judicial review proceedings, but reduced by 50 per cent in recognition of the ultimate outcome of those proceedings.  If the Court orders either of those costs outcomes, Speargrass also seeks 2B costs and disbursements in relation to filing a memorandum in the costs application.

[21]     In discussing the general costs principles, Speargrass submits that increased and indemnity costs awards are “inherently in conflict with the aim of the costs regime” and should only be awarded where there are substantial reasons to depart from

scale costs, with the onus on the party seeking such an award to justify the relevant uplift.

[22]     Speargrass  refers  to  the  Court  of Appeal’s  decision  in  Packing  In  Ltd (in liquidation) v Chilcott, where the Court said, in a case where the parties had mixed success, that in such litigation, “success or failure … is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed”.8

[23]     In response to the assertion that the settlement offer warranted an award of increased costs, Speargrass points to the fact that any departure from scale costs remains at the Court’s discretion and very late offers may have little or no impact.9

[24]    Furthermore, the failure to accept a Calderbank offer must be “without reasonable justification”.10     Whether the rejection of an offer is unreasonable is
assessed by reference to the circumstances at the time the offer was made. In the case of a non-monetary settlement offer the relevance of any such offer is governed by High Court r 14.11(3)(b) and requires the terms of the offer to be “more beneficial” to the relevant party than the judgment obtained.  If it is not more beneficial, no costs consequences will flow.

[25]     Speargrass does not consider the settlement offer was more beneficial because, under the judgment, the earth wall’s maximum permitted height is 2.7 metres, not
5.17 metres and only reducing to three metres once planting reaches five metres above ground.  The earth wall will also be grassed rather than planted.  Finally, under the settlement offer, costs to the Environment Court would “be allowed to run their course” (which presumably means awarded to Flax Trust), when that cannot now be maintained in light of the High Court’s judgment.

[26]     In submitting that there is no proper basis for an increased costs award, Speargrass reiterates that it was the van Brandenburgs who deliberately constructed the as-built earth wall which significantly exceeded its originally consented height and

8	Packing In Ltd (in liquidation) v Chilcott (2003) 16 PRNZ 869 (CA) at [6].
9	Rodgers v Advanced Creative Technologies Ltd [2013] NZHC 1095 at [33].
10	Rules 14.6(3)(b)(v) and 14.7(f)(v).

then refused to remove it.  It also submits that the van Brandenburgs did not win any of the three proceedings in their entirety.  Furthermore, the judicial review and PLA proceedings could not be characterised as “hopeless”.   In the judicial review proceedings the Court found material errors of law were established and in the PLA proceedings the  Court agreed that  the  wall was  a  “structure”  that unreasonably interfered with Speargrass’s/the Meehans’ reasonable use and enjoyment of their land for residential purposes, and so all necessary jurisdictional requirements for the exercise of the Court’s discretion to order reduction in the earth wall’s height were satisfied.

Flax Trust’s submissions in reply

[27]     Flax Trust distinguishes the decision in Packing In Ltd (in liquidation), saying

it dealt with the determination of costs in a single proceeding, whereas in this case there are three distinct proceedings, of which Speargrass won one and lost two.  The proper approach would have been to deal with the appeal in the first instance.  If that had been successful, then the PLA application was moot, which is precisely what has transpired.  Thus, while Speargrass was entitled to initiate all three proceedings, it must bear the consequence of doing so.

[28]     Flax Trust disputes that the settlement offer was not a better outcome.  It says Flax Trust could, as a permitted activity under the District Plan, plant and grow an evergreen shelterbelt that exceeds five metres in height and so Flax Trust’s settlement offer represented a better outcome in terms of preserving views to the south in the long term than Speargrass achieved or could have achieved at the hearing.

[29]     Finally, Flax Trust disputes the claim by Speargrass for the costs of its expert evidence as a disbursement. It notes that this Court observed that the expert evidence in the judicial review proceedings was misguided because it sought to take issue with the substance of the Council’s evaluation of the resource consent application, rather than identify errors of fact or law.  The only exception to this was in relation to how the Council assessed the permitted baseline for earthworks but, as Flax Trust submits, that was a matter that could be deduced from the documents themselves and did not require an expert opinion.

Should costs be awarded on the basis that Speargrass succeeded in only one proceeding and was unsuccessful in two?

[30]     While I accept that Speargrass was successful in the Environment Court appeal, but not in the judicial review or PLA proceedings, I do not consider that it should necessarily follow that steps incurred in those three proceedings were on foot and should be awarded two-thirds to Flax Trust and one-third to Speargrass.  While, as I observed in the judgment, these were discrete proceedings and involved slightly different permutations of parties, for all practical purposes the proceedings were managed as if they were different causes of action in the same claim.  Indeed, the reason they were heard together was because much of the evidence related to all causes of action. I accept that evidence was adduced in relation to some proceedings that was not directly relevant to other proceedings, and there were, of course, separate legal submissions on each claim.  However, that does not detract materially from the fact that all the proceedings were interconnected and were treated more like different causes of action in the same factual matrix.   Furthermore, the results were interconnected. For example, I did not go on to consider relief in the PLA proceedings because that had been achieved through the Environment Court appeal proceedings, and any variation on that outcome was best considered in the  resource consent framework of the Resource Management Act 1991.

[31]     For these reasons, I do not consider that, for the purpose of costs, I should treat these as three discrete proceedings with Speargrass winning one and losing two. They were sufficiently interconnected for me to assess costs on a global basis.

[32]     Thus, in applying the principle that the party who fails should pay costs to the party who succeeds, I consider it appropriate to order that costs (including disbursements) lie where they fall. While Speargrass succeeded in getting the outcome it wanted, it also chose to run two additional sets of proceedings, on which it was unsuccessful, and which would have roughly doubled preparation and hearing time. An outcome where costs lie where they fall fairly reflects each party’s success overall.

Should the position as to costs be adjusted in Flax Trust’s favour?

[33]     Having decided that the starting point is that costs should lie where they fall to reflect the relative success of each party, I now turn to consider whether there should be an adjustment in Flax Trust’s favour (in effect, increased costs against Speargrass), to reflect the issues raised by Flax Trust.  I accept that the consequence of Speargrass filing the additional two proceedings in August 2017 delayed resolution.   Had the appeal been heard alone, Speargrass would have been the successful party and would have been entitled to costs in the normal way.  However, in my view, Speargrass has been adequately penalised for filing two further proceedings and prevailing upon the Court to have them heard together, by my decision not to award costs to Speargrass having regard to its success overall.

[34]     I am, however, sympathetic to Flax Trust’s criticisms of the “extraordinary” amount of material that was placed before the Court, particularly in relation to the judicial review proceedings. Speargrass appeared to raise every conceivable criticism of the Council’s decision-making processes without discrimination.  As was noted in Ashmore v Corpn of Lloyds:11

…there has been a tendency in some cases for legal advisers, pressed by their clients, to make every point conceivable and inconceivable without judgment or discrimination.

That, observed Lord Templeman, was contrary to the duty of counsel “to assist the judge by simplification and concentration” rather than “to advance a multitude of ingenious arguments”.  The judicial review proceedings, in particular, were the antithesis of these standards.  However, I consider my decision not to award costs in Speargrass’s favour already takes account of the time taken in pursuing unsuccessful arguments in these proceedings and I do not consider a further adjustment is required.

[35]     I also do not consider that I should take account of the settlement offer to adjust the outcome on costs. The offer was made on the eve of trial so would only impact on trial related costs.  As Speargrass noted, it will not necessarily be unreasonable for a plaintiff to reject an offer that is made too close to hearing. More importantly, I do not

11	Ashmore v Corpn of Lloyds [1992] 1 WLR 446 at 453.

consider that the settlement offer, from Speargrass’s perspective, provided a more beneficial outcome.  Speargrass would have needed to wait a number of years for the mound to be reduced in height, and given the history of the parties, I have no doubt there would have been debate over what comprised the trees having reached sufficient height to prompt removal.  For example, would it be one tree, some, more than half, or every tree along the boundary that needed to reach five metres before removal was triggered?

[36]     Given my view that costs, including disbursements, should lie where they fall, Flax Trust’s submissions resisting the payment of the costs of Speargrass experts does not need to be considered.   However, I record that their evidence was of no real assistance to the Court in the judicial review proceedings, which should have focused on errors of fact or law that were apparent from the record of the decision-making. For that reason it is likely I would not have allowed some or all of the disbursements for Speargrass’s expert witnesses even if they had otherwise succeeded on this claim.

[37]     I am loath to accept Flax Trust’s submissions that the cases run by Speargrass were so unmeritorious as to warrant an uplift in costs.   In the judicial review proceedings the Council expressly acknowledged an error in its interpretation of its plans for both the notification and substantive decision on the resource consent. It was only on the hurdle of the exercise of my discretion that the claim foundered.

[38]     In respect of the PLA proceedings too, Speargrass succeeded in establishing jurisdiction on the facts.  Relief was declined because it had already been adequately achieved in the Environment Court appeal proceedings.

Conclusion

[39]     Having  now  examined  the  issues  in  more  detail,  I  am  fortified  in  my preliminary view that costs should lie where they fall.   While Speargrass was the successful party in one proceeding, it chose to pursue two additional proceedings in which it was not successful.   Furthermore, the materials it produced in those proceedings were unnecessarily prolix, and it adduced expert evidence that did not materially assist the Court. An outcome where costs lie where they fall fairly reflects the parties’ mixed success, and their contribution to the costs that were incurred.

[40]	I therefore order that costs including disbursements are to lie where they fall across all three proceedings, as well as this application.

Solicitors:
Bell Gully, Wellington
Meredith Connell, Wellington
Gallaway Cook Allan, Dunedin

Copy To:
Queenstown Lakes District Council